The Market Impact of Modular Data Centers19 min read

by | Jan 17, 2024 | Blog

The market for modular data centers and prefabricated data center modules is expanding at a greater rate than the data center construction market as a whole, according to research from Omdia. Revenue for modular facilities built onsite using prefabricated components rose from about $2.3 billion in 2020 to $3.25 billion in 2023. The forecast is for 13% annual growth through 2026 at which point the market will be worth $5.25 billion. That’s twice the growth rate of the data center construction market.

Modular Drivers

Omdia laid out the key drivers of modular data centers as being shorter lead times, predictability of construction, and cost. While stick-built data centers may experience long delays, can run into construction cost overruns, and can suffer due to supply chain constraints, modular units can be shipped onsite rapidly.

Additionally, there are logistics benefits to enjoy in having parts in stock and units already pre-built and available for immediate shipment. These units can be tested in the factory and certified before shipment. All it takes is a short commissioning project onsite to be up and running.

“Prefabrication is fundamentally about industrialization of construction jobs to reduce lead times, meet high standards with consistency, and to lower capital project risks,” said Daniel Bizo, Research Director, Uptime Institute Intelligence.

Another advantage of modular units is how they fit in with sustainability plans. In some cases, construction can be done with no concrete in the case of containerized modules. They require fewer building components, a lot less staff on site, and have been gaining a reputation as a way to lower Scope 3 emissions.

Some even say prefabrication improves data center quality – at least for smaller units.

“Manufacturing, assembly, and system integration in a factory environment can be better optimized and controlled for productivity and quality assurance,” said Bizo.

57 Modular Varieties

Heinz advertises that it offers 57 varieties. Modular vendors probably now exceed that in terms of the options available. They can be categorized in several ways:

All in One

There are all-in-one modules that give everything you might need for a complete, but small data center. All-in-one modules are finding a home at the edge, especially in telecom, as well as in deployments in enterprises with multiple retail outlets or numerous small branches.

Specialized Modules

Many modular vendors now offer specialized modules that focus on IT, power, or cooling infrastructure. The advantage here is that they can be plugged in and added to the network with minimal fuss. If more racks, more compute power, or more storage capacity is suddenly needed, an IT module can be shipped in a container or other housing and parked beside (or inside) the existing data center. IT modules comprise racks for servers, storage, and/or switches. Most of them lack supporting power and cooling infrastructure.

Power modules, too, are becoming popular. They contain some combination of UPS, switchgear, batteries, fire suppression, generators, and other items. Again, tow it onsite, plug it in and suddenly the organization has expanded its power provision and management capabilities.

“Power system modularization is an area where we’ve seen much of the growth in recent years as cloud operators and large colocation providers opted to use power skids and modules for system integration of both medium-voltage and low-voltage power distribution to meet project needs in scale, speed, and quality,” said Bizo.

Even hyperscalers and large colos have been known to turn to prefabrication at times. Some of their designs call for repeatable blocks for areas such as electrical rooms and cooling spaces.

“Prefabrication can support large deployments across the country with standardized skids and power modules,” said Aaron Badowski, Product Offering Specialist at Vertiv. “UPS, switchgear and cooling lineups are integrated offsite on skids or modules, transported and dropped into place like a Lego block on a large site.”

There are also various cooling modules around. They contain chillers or other gear to cool equipment. There are even empty shells that house one or other of these modules, and auxiliary units that provide extra space for network operation centers (NOCs), meeting rooms, office space, etc.

Custom Modules

The whole point of modularization is to eliminate customization. That said, standardization only goes so far. Hence, modular data center vendors now provide some customization options. Of course, the more customization chosen, the slower will be the delivery. There is every chance that a standard modular can be shipped that week. Custom units can add weeks, or perhaps months in some cases.

AI Units

We are experiencing a steady rise in data center density. But not everyone has the space or the cooling/power onsite to provide the dense racks required for AI. The demand to make existing facilities denser to fit in more racks or host AI-based applications is sometimes being served via modular units. Some choose to create more white space for racks by pulling their power infrastructure out of their current data center and placing it in a module outside of the building.

“This offers additional white space square footage to deploy more racks and, in turn, more IT load,” said Badowski.

Modular is not for Everyone

Although modular use cases are growing, it doesn’t mean prefab units or prefabricated data centers are right for every occasion. Larger data centers tend to be purpose-built and prefabrication is largely beyond their scope and size range – except to provide small units that are repeated throughout a huge facility.

“Modular finds its value in large-scale deployments by scoping small packages of infrastructure onto skids and modules to support the construction process,” said Badowski. “When program strategies become very complex and unique with little volume, the value of modular disappears.”

Omdia numbers put the modular data center market at only 3.6% of overall data center revenues at the end of 2022. Despite growing at three times the rate of the overall market, it will still not represent 5% of revenues by the end of 2026. Modular construction may be growing. But it remains a small slice of the pie.


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Drew Robb

Drew Robb

Writing and Editing Consultant and Contractor

Drew Robb has been a full-time professional writer and editor for more than twenty years. He currently works freelance for a number of IT publications, including eSecurity Planet and CIO Insight. He is also the editor-in-chief of an international engineering magazine.


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